Wednesday, November 17, 2010

We have been hearing the term coercive repayment and this is what we
have understood from our interaction with about 52 microfinance clients in the
field in India, during the last 6 weeks. These items represent a compilation of
what several clients (especially, those with multiple loans) and/or their
families told us as we talked to them in various places in Andhra Pradesh, Tamil
Nadu, Karnataka, Orissa and West Bengal:

Note:
There are Video Clips/Recordings available of what clients said for the record

Client A: “The fact that fieldworkers/agents came day after day (for week after
week) and pressured me to pay back is itself a sort of harassment and coercion.
As I (and family) do not have serious livelihood means, we have to either
borrow from another MFI (this would help consumption and also repayment for
some time) or borrow from money lenders (at even 10% per month) to pay them and
get them off our backs. The idea is WE HAVE TO SOMEHOW PAY THEM or they will
not leave. When all options of borrowing run out, we either have to migrate or
die. This is what is happening to other women and may happen to me someday
soon”

Client B’s Husband: “My wife who
committed suicide, had taken 8 loans and had to pay back 2 loans on Monday, 1
Tuesday, 1 Wednesday, 1 Thursday, 1 Friday, 1 Saturday (every fortnight one),
and 1 once a month. There was no respite during the week and on Saturday, she
felt happy that Sunday was the next day but that was short lived as we had to
make payments from Monday again and the whole cycle continued…When one has to
pay loan repayments on 6 days a week and people will not leave without
collecting payments, it is downright harassment.”

Client C: “The collection agents/staff
came and stayed put with us until we paid the instalments and this built our
pressure as they would be watching us, often passing snide remarks and
insulting us. They would even ridicule our children and basically try to
embarrass us – so much so that, we would even not hesitate to go to a money
lender and get the instalment amount as a loan at 5-10% rates of interest and
send them off.”

Client D: “One MFI had the practice
whereby if the 1st staff did not return within a stipulated time of 2 hours,
other staff will successively join him. Soon, by 10/11 AM, there could be 4/5
people sitting near our house and making all sorts of insulting remarks. They
also publicly shamed us in the village. I once ran here and there and finally
paid them off at 4.30 PM in the evening and I was traumatized at the end of it
all. Now, I dread their coming every time…

Client E’s Husband: “Some collection
agents were really rude-after my wife committed suicide.” They came and said,
“If you cannot find means to repay, then you should send out your two beautiful
daughters, and get them to earn money by other means (prostitution…) and then
repay to us.” One of them even said, “If you cannot do that, send them to me
and I will use them and pay off your instalments. They are very beautiful and
would be able to earn a lot. I wept as I heard this…”

Client F: Another client says she is unable to bear the harsh language of MFI
staff and, as a result, was pressured to take loans from local money lenders
@4% interest per month to pay back instalments. She also claimed to have sold
off her jewels to repay MFI loans as their staff were abusing her, whenever
they came to the village for collections.

Client G’s Husband: One client’s husband said that the staff said, “We do not care if your wife died. You
better pay when we come back tomorrow”. The husband further said that, “I had
to borrow at 12% to pay them the next day as otherwise, they had threatened to
chain me to the Big Tree, outside of the village and make me a laughing
stock”.

Client H: Another client said, “The
earlier support (SHG) groups have now become pressure groups that insult. So
there is no respite and harassment is 24x7 as group leaders and other members
live at the village itself and they obstruct participation in village
activities if the loan instalments have not been paid. You just cannot get away
without paying as they have a lot of local influence and can do
anything…”

Client I: A client remarked that in the case of defaulting members, if the
defaulter did not repay the loan over dues, the group leaders and MFI centre
leader simply took over the defaulter’s assets into their possession and then,
they repaid the loan amount by liquidating it.

Client J: A client said that, “once at
the time of weekly repayment, there was a death in the neighbour’s house who
was also a member and the collections agents told the bereaved family that
unless she paid the last two overdue instalments, they would not allow the body
to be lifted or rites to be performed. Then, the client claimed that, she went
to a money lender in a nearby bigger village and got an emergency loan at 7%
and helped her neighbour pay back the instalment”.

While the above is by no means a scientific study, it nonetheless provides some
(initial) indication into the kinds of coercive mechanisms that could be used
at the field level (not exhaustive) by some MFIs and it does converge with the
findings of previous research into coercive repayment (APMAS and others). These
have been compiled into key coercive recovery strategies that could be used by
some MFIs and these are summarized below:

Strategy # 1 - Life/Work Obstruction: Field
workers, agents, centre leaders and/or group leaders/members may hinder and
obstruct the normal life and work of clients and/or their families and thereby,
force them to repay, using several means (borrowing from money lenders, take
over assets etc) that may not necessarily be in the clients’ interest and one
which could cause undue hardship to them.

Strategy # 2 - Threats: Collection agents/field workers could threaten the
clients that they would resort to violence and/or physical abuse if money is
not repaid; they may also carry the threat out, if money is not forthcoming
from the clients;

Strategy # 3 – Verbal Abuse: Field workers/agents may (verbally) insult, abuse
and/or intimidate the borrowers and their family members and get the repayment

Strategy # 4 - Following the Client and Pestering: Field workers/agents could
continually follow the borrowers and their family members from place to place
and pester them for payment and keep on embarrassing them, until the money is
paid;

Strategy # 5 - Repossession and Sale of Property: Sometimes, the centre leaders
and/or group leaders/other members may even take over property owned or used by
clients and sell that and take the repayment

Strategy # 6 - Satyagraha Outside Clients House/Place of Work: Field
workers/collection agents could sit outside the house or places of work (like fields/shops)
for hours and hours and keep on harassing for payment and leave only after they
get it

Strategy # 7 - Embarrassment Strategy: Field workers/collection agents may
sometimes even talk to business customers and/or guests of the clients and
embarrass clients and thereby get them to repay

Strategy # 8 - Physically Take Over Assets/Documents as Collateral: The centre
leaders, group leaders and/or other members could forcibly remove
assets/documents of the borrower (like ration card etc.,) and not return
it until the repayment is made by client

Strategy # 9 – Physical Intimidation: Field workers/collection agents may
physically intimidate the clients and get local toughs to rough them up once or
twice, so that repayment is forthcoming thereafter

Several questions arise from the above discussion and the RBI sub-committee
would surely have to look into the (range of) mechanisms that have been and are
being used by (some) MFIs to collect loans at the grass-roots.

A rigorous scientific study will have to be commissioned and undertaken by a
neutral set of people and only that can reveal the real extent to which such
coercive tactics and strategies are used by (some) MFIs on the ground...

5 comments:

AS THE MICROFINANCE IDUSTRY COLLECTS 95% COLLECTION ONTIME & FOR REST 5% COLLECTION WE ARE ADOPTING DIFFERENT STRATEGY.IF WE PEOPLE ARE LEAVE THAT AMOUNT TO SINGLE CUSTOMER THEN THAT WILL SPREAD TO OTHER CUSTOMERY ALSO

IN THE PRESENT CIRCUMSTANCES ALL ARE BLAIMING MFI BUT I THINK GOVT SHOULD BE BLAMED FIRST

THEY ARE GIVING TAX EXEMPTION TO ALL IT COMPANY WHO ER SERVING ELITE CLASS OF SOCIETY BUT THEY ARE CHARGING TAX FROM MFI THOUGH WE ARE REALLY WORKING FOR POOR

THEY ARE AGAINST MULTIPLE LENDING BUT IS BOTH GOVT & REGULATING AUTHORITY PROVIDING ANY TYPE OF HELP TO THE SECTOE TO AVOID SUCH PRACTICE

i ask this foolish blogger a question. is it a crime to ask for repayment for the loan that one provide? wont you ask if you give away loan to your fried or a relative? who said MFI's staff harass them..i know a lot of cases where the members have harassed the staff..you go to an unknown village and harass the inhabitants..is it practical? dont be funny..Staff's duty is to collect the money and it is the member's duty to repay them..I beg ignoramuses like you to have knowledge about what's really going on on what you are writing and please dont cast aspersions on an industry whose motive is to eradicate poverty..

foolish blogger, please tell me is it a crime to ask for repayment on the loans that one provides? you cant jus go and harass a member. it is not as easy as it sounds. if you have proper field knowledge you will know who harasses who..please dont try to cast aspersions on an industry whose motive is to eradicate poverty from the face of India.people like you have always been there barking whenever there has been a revolution of sorts..But as the saying goes"the dog barks, the sun still shines"

MFIs are neither into charity nor subsidy distribution. Why can't the clients pay up on time thereby savings themselves from the alleged mistreatment? Weren't the clients aware that they NEED TO REPAY when they opted for the loan?